How much money will Tennessee businesses get back after the state changes their tax system? The House and Senate cannot agree.


Julia RitcheyWPLN News

The Tennessee House and Senate are at odds over how much the state should give back to companies that paid franchise taxes under the current, real estate-based model.

Tennessee wants to tax businesses differently – and as soon as possible.

Currently, franchise taxes are based on a company's assets, but bills in both the Tennessee House and Senate would change that to be based on a company's income.

What the two chambers do not agree on is the question of how much the state should give back to companies that have paid their taxes according to the current model. The House passed its measure and sent it to the Senate for consideration on Monday.

The plans

The House version provides $700 million for tax refunds over two years. The change comes after possible lawsuits the state could face over the way the existing model taxes businesses.

The chamber's bill differs from the Senate's version, which would give companies $1.5 billion in rebates over three years.

The House also includes a transparency clause in its bill that would publicly name companies that choose to accept the rebate. House Majority Leader William Lamberth, R-Portland, says transparency is necessary.

“If we return taxpayer money to a paid-up company, then the taxpayers will know,” Lamberth said. “They will know the name of the company and how much they got paid.”

The House version also stipulates that companies that accept the new discount would give up the right to sue the state over the issue.

It is unclear whether the Senate will agree to resolve the differences. So far, Senate Speaker Randy McNally, R-Oak Ridge, has said they can agree on the transparency part, but he's unsure about shortening the time frame for rebates.

Why do officials think the change is necessary?

Attorney General Jonathan Skrmetti has received questions from a large group of businesses about the legality of Tennessee's franchise tax. Officials told Skrmetti that if a lawsuit were filed, the state could pay an amount well beyond the $1.5 billion the Senate wants to set aside.

Following that estimate, Gov. Bill Lee suggested that the Legislature allocate $1.2 billion for businesses.

Who is against?

Republicans defending the bill say, “When companies get a tax break, it ultimately goes to citizens through lower product costs.”

More: Because of legal concerns, Tennessee is considering changes to a long-standing business tax

But Democrats called the measure “trickling the economy” during debate on the bill and said the idea doesn’t work.

Sen. Bo Watson, R-Hixson, reluctantly supports it.

“No one likes this solution,” he said. “The governor doesn’t like this solution. The tax office doesn't like this solution. The Attorney General doesn’t like this solution, but in reality this is the best solution.”

Democrats have scoffed at the idea of ​​giving tax breaks to multi-million dollar corporations while at the same time the state refuses to give citizens tax breaks in the form of a food sales tax.